On 25 September 2019, the NL Business department of FMO (Entrepreneurial Development Bank) and the Netherlands Water Partnership (NWP) published the recently concluded research report ‘Expanding the horizon of the Dutch Water Sector – A sector view on international positioning and financing challenges’. This study assessed the financial challenges facing the Dutch water sector in reaching Sustainable Development Goal 6 (SDG6) by 2030.
The Dutch water sector is globally known for its excellent water expertise, hands-on mentality, innovative technologies and capacity to address global water challenges. It is facing obstacles though in meeting the demands of the sector and in advancing internationally. The financing challenges in particular have received little attention. To address this situation, FMO and NWP undertook a market analysis that highlighted various issues such as the importance of full-service solutions in approaching the SDG challenge.
A dazzling USD 7,500 billion dollars are needed between now and 2030 to build the infrastructure required to reach SDG6 and protect the world’s population from ‘too much, too little, and too polluted water’. USD 1,200 billion dollars will not be available if current trends continue. Water projects are disproportionally financed with public money and future worldwide water challenges will never be met by the public sector alone. Certainly not in emerging markets. Furthermore, the study concludes, meeting these challenges will need a multi-pronged approach:
- Full-service solutions such as Engineering, Procurement and Construction (EPC) and Design Build Finance Operate and Maintain (DBFOM). This would ensure that a service, such as the provision of clean water or wastewater treatment, is delivered during the entire life-cycle of a project instead of only exporting a single product or technology. Specialised small and medium-sized businesses in the Netherlands could benefit if large Dutch companies that have the knowledge, skills and the financial position would involve them and act as the lead organisation to win water supply and treatment contracts abroad.
- Better project structuring by involving high quality financial experts at an early stage to develop more capacity in financing project development and project implementation. This will improve the business case for water projects, as a result of which more projects will be financed and realised.
- Creating a one-stop-shop for funding instruments. The funding instruments in the Netherlands are fragmented with many different and often small facilities. The market should be organised in such a way that entrepreneurs will not need to approach different financing entities for each different phase of a project. There should be a central point of expertise that supports entrepreneurs in finding their way around Dutch financing instruments (i.e. subsidies, loans, trade credit insurance etc.).
Furthermore, one thing is key to change the current situation: the project itself should be leading and the investment opportunity put first, not the constraints of the financing instruments.
